Measuring the Cost-Effectiveness of an R&D Tax Credit for the UK

Rachel Griffth, Stephen Redding, John Van Reenen

Research output: Contribution to journalArticlepeer-review

22 Scopus citations


This paper investigates the economic impact of the government's proposed new UK R&D tax credit. We measure the benefit of the credit by the effect on value added in the short and long runs. This is simulated from existing econometric estimates of the tax-price elasticity of research and development (R&D) and the effect of R&D on productivity. For the latter, we allow R&D to have an effect on technology transfer (catching up with the technological frontier) as well as innovation (pushing the frontier forward). We then compare the increase in value added to the likely exchequer costs of the programme under a number of scenarios. In the long run, the increase in GDP far outweighs the costs of the tax credit. The short-run effect is far smaller, with value added only exceeding cost if R&D grows at or below the rate of inflation.

Original languageEnglish (US)
Pages (from-to)375-399
Number of pages25
JournalFiscal Studies
Issue number3
StatePublished - Sep 2001
Externally publishedYes

All Science Journal Classification (ASJC) codes

  • Accounting
  • Finance
  • Economics and Econometrics


Dive into the research topics of 'Measuring the Cost-Effectiveness of an R&D Tax Credit for the UK'. Together they form a unique fingerprint.

Cite this